As credit cards, debit cards, and other alternatives to currency have grown in popularity, the competition among the institutions that provide these financial instruments has also increased. Today, many consumers choose a credit card, debit card, or the like, based on the financial incentive to the consumer for using such a card. One popular incentive offered are points, miles, cash or other rewards. Typically, for every transaction made by a cardholder using, say, a credit card, a proportional number of points, miles or other rewards are placed into a separate account. When a sufficient amount of rewards have accumulated in the account, the consumer may be able to redeem them for goods, services, or discounts toward the purchase of same.
Traditional reward systems have been limited by the extent to which rewards could be redeemed. For example, rewards in the form of airline miles may be limited to redemption only for travel, and only on a particular airline. Similarly, loyalty points rewarded by a particular retail store may be limited to redemption only at that store.
Other reward systems have allowed for a variety of redemption choices, but may be limited in the manner of redemption: many existing systems require the cardholder to redeem through a centralized fulfillment center, be it by mail, phone or online. This often results in inconvenience to the cardholder and delay in the use of the redeemed reward. Similarly, some rewards systems, such as most airline miles reward systems, have extremely high minimum thresholds for redemption of rewards (e.g., 25,000 miles needed to redeem for a flight).
Although some systems have attempted to provide for redemption of rewards at a merchant's point-of-sale, these systems suffer from any of several limitations. Existing systems may require the active participation of the merchant, taking the form of installing special equipment for redeeming rewards, modifying the merchant's transaction database and systems to account for reward redemption, paying an additional fee to the card's issuing bank for processing a reward redemption transaction, and/or changing employees' workflow processes to provide necessary interaction with the cardholder to effectuate a rewards redemption. In short, no existing rewards redemption system is transparent to the merchant.
Traditional reward systems require separate authorizations for reward redemptions and credit purchases. For example, some existing cards contain two magnetic stripes: one containing credit card information, and one containing rewards account information. Using such a dual-striped card, the cardholder or merchant must make two swipes of the card—typically on different devices—if both credit and reward points are to be used. Further, two networks are used for such a transaction: one network for the credit card authorization, and one for the rewards account authorization.